Deductions from pay are amounts taken out of the worker's pay before it is 'in hand'. Some deductions are authorised by legislation, and some by private agreement between employer and employee, such as Union Fee, Salary Sacrifice Superannuation or insurance.
In Q6, there are two default Deductions, which are Salary Sacrifice Superannuation and Union Fee.
1.Salary Sacrifice Superannuation: Salary sacrifice is an arrangement where Employee agrees to forego part of their future salary or wages in return for the Employer providing benefits of a similar value.
2.Union Fees: Union dues are a regular payment of money made by members of unions. Dues are the cost of membership; they are used to fund the various activities which the union engages in. Nearly all unions require their members to pay dues.
Steps on how to create Deduction
1.Go to Settings > Pay Item List;
2.Click Deduction > Add New;
3.Fill the required information;
Fields explained in Deduction Pay Item
1.Deduction Name: This is a mandatory field, which can’t be left blank. User may assign an unique name describing what this Pay Item is about.
2.Deduction Payable Account: This is the correspondent account to pay out the Deduction. In this case, Payroll Liabilities Account is the selected account by default.
3.ATO STP Reporting Category: This Category settings is required by ATO Single Touch Payroll (STP) process. Any Pay Item required to be included in STP report to ATO should select one of the categories from this section. And also any item user may not wish to be included in the STP report should not select any ATO STP Reporting Category.
4.Type: There are two kind of Deduction Type, which are before and after Tax Deduction. Default selection is Before Tax Deduction.
a.After Tax Deduction as it names, it’s the deduction made after tax deduction, such as Child support, Social club, Cour Orders, Health insurance or Union fee.
b.Before Tax Deduction as it names, it’s the deduction made before tax deduction, such as Superannuation or Fringe Benefits Tax (FBT).
4.Calculation Basis: User may set up individual formula for each Deduction through the Calculation Basis.
a.Percentage: User may enter a percentage to calculate against one of the Pay Item Wages in the next field, and specify any Pay Item excluding from the calculation in the Exclusion List, where it has included the entire hourly wage list. Multiple options are available inside the Exclusion List.
Let’s take an example on how exclusion list works.
If user has selected Overtime (2 x) from Exclusion List, and generate Pay Run with settings of 5% Salary Sacrifice Super on Gross Wage, then the overtime hours would not be taken into calculation on Salary Sacrifice Super no matter how many overtime hours have been done. However, if Overtime (2 x) is not selected in Exclusion List, then the overtime hours needs to be added into total hours calculation for Salary Sacrifice Super.
A number would indicate how many Pay Items have been selected from Exclusion List behind the field.
b.Fixed Rate: User may enter a fixed amount to be add on per pay period, no matter it’s weekly, fortnightly or monthly.
5.Is this deduction related to Superannuation is not selected by default. Once user has selected this option, another field would display for selection which is the Preferred Name for Fund. User is required to specify one of the Fund products from the list or add new fund. And the above Default Payable Account would change into NL-3260 Superannuation Payable account automatically.
6.Save: Once it has been saved, the Pay Item would be included in the Pay Item List.
7.Exit: Screen will be back to Pay Item list once user clicks Exit.